Sometimes, during a terminal and life-threatening illness, you have an urgent need of immediate cash and you are also not in a position or not willing to continue with your life insurance policy. In such cases, Viaticals law comes into the picture. A viatical is the sale of your life insurance policy to a third party usually a financial company for a cash consideration.
A viatical sale is effected when the insured person (the person who owns the life insurance policy) is certain that he has only limited life to live because of some terminal illness and needs immediate cash, decides to sell off the policy. The buyer, usually a financial company, buys the policy for a cash consideration which is less than the face value of the insurance policy. The buyer seeks a certification from the doctor on the illness and the number of years of life left with the insured. The payment or the cash consideration if often, 60 to 80 percent of the face value of the insured depending on the medical certification and other allied factors. The payment is always made to the owner of the life insurance policy.
Once the viatical transaction is over, the financial company or the buyer becomes the new owner of the insurance policy and pays the remaining due insurance premiums. On the death of the insured, the death benefit under the insurance policy goes to the new buyer.
The insured person makes a viatical transaction for the following reasons:
However, Viaticals insurance also has its own disadvantages like,